Part #6 of a series on managing tough times.

Layoffs. Reductions in pay and benefits. More work to do with fewer people and resources. Decisions perceived as good for the business – bad for the people.

Most managers and business owners hate making these cuts and do so only as part of the process to avoid the coldest cut of all – closing the business.

Their attempts to save the business often backfire. As they lower expenses, morale declines. So does loyalty. And productivity. Profitability too. All bad for the people AND the business.

If you need to make some of these tough, seemingly cold cuts for the financial health of your business but dread the impact on productivity and morale – theirs as well as your own – here are 12 ways to warm things up.

1. Try to find cuts in other areas before laying people off.

The reason for this is well said by Anna Prior in “Be Prepared for More Cutbacks” (Wall Street Journal, January 26, 2009):

“Cutting back on employees may be the easiest way to save money, but it’s very short-term thinking,” says Bette Price, a certified management consultant in Dallas.

Once the costs of laying off an employee are totaled – severance, a smaller work force, heavier workloads for other employees, and the possibility there may not be the same level of talent available once the tough times are over – it makes sense for companies to consider other cost-cutting moves.”

I agree, AS LONG AS, the cost cutting moves are in the best interest of your customers and AS LONG AS, the cost cutting measures are socially and environmentally responsible.

2. Get staff members involved in the search for budget cuts.

They often have great ideas since they work with your customers and systems every day and have first-hand knowledge of what works and what irks. The latter usually reveals opportunities to create or tweak a system or practice which usually increases efficiency which usually reduces expense. And usually increases customer satisfaction which normally increases customer retention. All of which tends to boost morale and revenue. Profitability too.

And it all happens faster if staff is part of the process from the start.

With all of those potential rewards, why not give it a try? Get “how to” tips from Sally in “Using All Your Strength“.

3. Make mention of the possibility of layoffs (and/or other worst case scenarios) and your preference to come up with ways to avoid them (if that is truly your preference and intention).

Be sure to stress that you are stating a preference not a promise. See Sally’s language (from “Using All Your Strength“) below.

In case any of you are feeling nervous, my first choice is to accomplish this goal without cutting jobs. I cannot promise that at this point. But it is my preference.

They will appreciate your desire and efforts to find cost reductions that don’t affect them as personally as salary reductions and layoffs do. Plus it helps them understand very clearly what’s in it for them to help with #2. Not as a threat, but as a fact. I.E. – If we can come up with enough savings elsewhere, we won’t have to cut salaries.

4. Invite people to come forward –

people who may be thinking about quitting or wishing they could work a reduced schedule. This is a perfect add-on to #3. See how Sally does it below.

In case any of you are feeling nervous, my first choice is to accomplish this goal without cutting jobs. I cannot promise that at this point. But it is my preference.

If you have been thinking about quitting and haven’t told me or if you are interested in reducing your hours, please tell me ASAP because it will make this process easier.

Or you could take the approach shared in “Small firms advised not to lay off staff“

KPMG is currently offering staff the option to sign up for working a four-day week or taking short-term leave on 30 per cent pay, although this is a contingency plan.

“We are certainly hoping that the majority of staff will show their willingness to sign up for this if necessary, even if they do sign up it won’t necessarily mean that they will be asked to go on to a short working week,” the spokesperson continued.

This approach is more specific, more structured and seems like a safe way (for employer and employee) to test the potential popularity of a possible program.

#1-4 can help warm people up to cold cuts. But they will turn cold quickly if you stop there. So keep reading! To keep them warm, you must do these things as well.

5. Respond and deliver.

Respond quickly (if not instantly) to all ideas that result from your invitation in #2. Tell the reasons each one was selected or not. Deliver on any promises made. Here is what Sally said in an effort to make expectations clear on this:

Right now I’m trying to come up with a long list of ideas – as many as possible – as wacky as possible. I’d like your help generating that list. And then I’ll have to cull through them and decide by Friday. I’ll share my list with Bob and then with you at our next staff meeting.

6. Set a good example.

If you ask everyone to curtail spending on kumquats, you must do so as well.

Think they aren’t watching?

They are.

Like a hawk.

7. Communicate frequently (at least weekly) and positively (but factually) about progress being made.

This is easier for you and them, if you set a dollar goal the way Sally did in 4 Musts for Managing Tough Times.

If you don’t keep them informed about progress, they will make up their own version of the truth. Or they will decide it is no longer important. Either way, you lose momentum for your cause.

And then if you have to announce

pay cuts or layoffs –

out of the blue –

with no warning.

Hard for that not to feel like a cold cut.

On the other hand, if you are communicating the facts regularly, keeping people posted about the actions taken, the effectiveness of each, encouraging them to continue – and then you announce pay cuts or reduced hours or even a layoff – still tough. But at least everyone is a bit prepared. And they know how much effort went into avoiding it.

Don’t stop here!

They are more likely to stay warmed up if you…

8. Are in it with them.

If they are getting a 10% pay cut, it helps if they know that the boss is also taking a 10% pay cut.

And even better when they find out that hers went into affect a few months ago.

And even better when they find out that she took a 15% cut.

Besides that, revisit #6 and remember

the hawk.

9. Avoid/explain “splurges”.

Once it’s gone to something personal like “my paycheck” – the hawk becomes ever more vigilant.

Any perceived inconsistency – having a company meeting at a nice hotel, giving all participants an ipod as part of the meeting theme, a luncheon at a nice restaurant – even the smallest item can easily be perceived as a luxury, spawning comments like:

“If they can afford THAT……then why did I have to take a pay cut?”

“Perks are great but I can’t buy groceries with them.”

Snide remarks rippling through the hallways.

All can turn icy in an instant.

Maybe it was a special deal – a freebie or a trade. If so, consider letting them know.

We all spend money differently, and we can’t please everyone, but be aware of this and sensitive to it.

You’ve asked them to help you watch expenses. And they are doing so.

10. Keep them informed.

Repeat of #7 – but with a twist. Continued reports on progress to goal are important.

Here’s the twist.

If there have been pay cuts or other temporary staffing measures, be sure to address these specifically. And give updates often.

Is there is a certain profit level at which salaries go back to the original level?

Or is there is a certain profit level at which they can receive a bonus – a bonus which might even come close to making up for the salary they lost from the cut?

If their participation or productivity doesn’t matter to the success of your business –

then don’t bother with this.

If you still need them on your team – in your huddle – read this section again.

11. Make it safe to ask questions.

Even though trying your best to keep them informed, you can’t read their minds.

Encourage them to raise questions. Make it safe to bring up expenditures they perceive as “splurges” (like in #9) – or for progress updates (like in #10.).

That way, you can address or correct them – hopefully in time to keep those cold shoulders from turning on you.

If that happens, they aren’t in your huddle any more.

Can you afford for that to happen?

12. Stay close with each individual on your team.

Though busy as ever trying to make things work, it is critical for the manager to take time to check in with each individual – even if for a few minutes each week. To thank him for working so hard to make it work. To ask about any special concerns she may have. To check in on his commitment to the job, the customer and the organization as a whole.

Here is a beautiful example:

Anthony Carey, General Manager of The Siena Hotel & Il Palio Restaurant in Chapel Hill, NC, recently met with each of his Executive Managers for a “passion check”.

Each of them had been asked to operate on a reduced budget. For some that meant a pay cut. Each one was being asked to work longer hours or whatever it would take to continue to deliver Four Diamond Service to all of their guests.

Anthony wanted to be sure that each manager felt passionate about his or her individual commitment to that effort. One of the six was not able to commit and was grateful that Anthony had clarified the expectations in advance. The other five committed wholeheartedly.

It’s too soon to report the financial impact of these passion checks, but not too soon to share the impact on morale.

By way of this exercise, Anthony says, “Everyone knows we are all in this together, and we are all ready to tackle any issues that come our way, which has created a high performance work environment, and that is Awesome!”

Great job, Anthony! Sounds to me like a fired up team!

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Dealing with profitability issues can be difficult and downright scary.

But if the financial health of your business is suffering, I encourage you to take charge, stay out there, act boldly and hunker down.

And as you create your hunker down plan, use these 12 tips in this article to warm up those seemingly cold budget cuts you need to make.

How wonderful it will feel to make those cuts without making your team go cold on you!

Even more wonderful if they get fired up in the process!

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©2009 – Jan Bolick, Business Class Inc

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